Aer Lingus aims to force sale of Ryanair stake

Aer Lingus is planning to take legal action to force Ryanair to sell its 29.44 per cent shareholding in the airline.

The move follows confirmation by Philip Lowe, the EU's director general for competition, that the European Commission has concluded that it does not have the legal authority to force Ryanair to sell its stake.

In June, the commission prohibited Ryanair's €2.80 a- hare bid for Aer Lingus. Ryanair appealed that decision to the European Court of First Instance in Luxembourg.

Aer Lingus said yesterday it was awaiting the commission's decision, which it will receive by October 17th. It then plans to make an application to the Court of First Instance appealing the commission's finding.

If Aer Lingus's appeal is successful, the commission could force Ryanair to dispose of its stake in its rival. Ryanair has spent about €400 million buying Aer Lingus shares.

Aer Lingus said it would also ask the Court of First Instance to make an order to "prevent Ryanair from interfering in the running" of its business pending judgment on the appeal.

Aer Lingus chairman John Sharman said Ryanair had attempted to interfere in the commercial business of the airline over the past 12 months.

"Since this time last year, Ryanair has pursued every available tactic to prevent the further development of Aer Lingus as a competitive force, in order to defend its own patch out of Dublin," Mr Sharman said. "As the takeover has been barred, it follows that Ryanair's shareholding, built up for the purpose of mounting a takeover, should also be barred."

Aer Lingus's announcement met with a curt response from Ryanair. "Good luck to them," said Jim Callaghan, Ryanair's head of regulatory affairs. "We now have a definitive decision from the European Commission. It also seems fairly clear to most people that Ryanair doesn't have any influence or control over Aer Lingus.

"Aer Lingus's directors have refused two requests from us to hold egms [over the Shannon-Heathrow route being axed], even though they are legally obliged to do so under Irish law."

Aer Lingus's appeal could run for some time. A hearing is likely to be heard some time in 2008, with the possibility of an appeal to the European Court of Justice.

Aer Lingus's shares closed down two cent or 0.85 per cent in Dublin yesterday at €2.34.